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Wednesday, 13 October 21
MARKET INSIGHT - INTERMODAL
 Following up on our insight on May 2021, where we discussed about the Capesize market outlook for the second half of the year, we are pleased to see that dry bulk Q4 high seasonality has returned after at least 3 years of underperformance, driving also the Q4’21 and Q1’22 FFA curve to multi year highs. Back in May, we had explained why we thought a higher Cape market peak during 2H2021 was in the cards, with fundamentals recently being boosted by accelerating restocking demand, near record high Capesize congestion at Pacific discharge ports and a global energy supply deficit leading to scrambling for coal supplies globally. In the present insight, we are briefly addressing some of the market points that are likely to impact the direction of freight rates looking forward.
Iron Ore restocking to be in full swing during Q4 regardless of China’s crude steel production contraction. Q1 2022 Risks: Slow-down in construction during winter and in view of China’s Winter Olympics, exacerbated by high energy costs. China’s property developers slowing down land purchases amid deleveraging efforts
The primary force behind the crude steel production decline in the short term is the severe coking coal /coke and power shortage forcing crude steel production to adjust downwards. Cuts are expected to intensify from November 15th to the end of the year as a 1st stage and then through March 2022, as per government’s pledges. Even if most of the targeted steel production cuts materializes through Sep-Dec 2021, probabilities that they will immediately translate into a decline in iron ore requirements are low, as 1) the iron ore restocking process is directly connected to iron ore seaborne supplies which are the strongest during Q4 – the decline in iron ore prices from multi year highs in May 2021 is currently facilitating the restocking process supporting the purchasing power of steel mills – steel mills margins remain strong due to the diverging trends in steel and iron ore prices, despite the surge in coking coal costs 2) Skyrocketing energy costs are likely to negatively impact more the scrap related steel production process during the quarter (Electric Arc Furnaces are higher energy consumers) vs Blast Furnaces (more iron ore requirements). When iron ore restocking will be completed, this will be a negative signal for new iron ore procurement, likely during the 1H2022. On this note, iron ore inventories at China’s ports have increased by +9.2 million tons since the end of Q2 and there is more room for them to inflate further by the end of the year.
Inflationary pressures on the energy complex supportive to dry bulk freight rates in the short-term. Q1 2022 Risks: La Nina conditions might bring a colder winter supporting coal consumption but also wetter conditions in Australia from December to April increasing risks of exports disruptions
Natural gas prices have raised the price ceiling higher for the whole energy complex and while international coal prices have hit record high levels, the price gap with natural gas continues to incentivize substitution in power generation globally and Europe particularly. The competition for securing coal supplies in both basins has inflated $ per ton freight across major coal routes to 12-year highs – which we think is sustainable - as the % of freight in coal prices is still low (approx. 13%) compared to 2009-2010 (approx. 22%).
China’s domestic coal output is expected to increase in the next months on a series of government measures to boost supplies, although the incremental volumes during Q4 are not expected to be sufficient to cover the supply deficit. The continuous decline in coal inventories at major power plants and expectations for a cold winter continue to indicate increasing thermal coal import needs for restocking in the winter heating season. Demand for coal imports is further enhanced by India’s urgency to restock as inventories at power plants have dropped to the lowest level since 2017 at 7.3 million tons but at a record low in terms of days of consumption i.e. just 4 days, as per latest data from India’s Central Electricity Authority.
High bunker prices are supportive to dry bulk freight rates as we had discussed in our May insight, likely to exacerbate fleet inefficiencies across the basins, with the Atlantic expected to benefit more in the short term. Talks about demand destruction from high oil prices will be substantiated when manufacturers’ profitability and consumers’ purchasing power starts to be negatively impacted with costs curves rising upwards. This is likely to take place at higher prices than the current $80/bbl in our view and those would have to be sustained during the quarter.
By Tamara Apostolou, Research Director
Compiled by:
Intermodal Research & Valuations
Analysts:
Yiannis Parganas
Tamara Apostolou
Disclaimer and legal disclosure: For any further queries please do not hesitate to contact our Research & Valuations Department. The information contained in this report has been obtained from various sources, as reported in the market. Intermodal Shipbrokers Co. believes such information to be factual and reliable without making guarantees regarding its accuracy or completeness. Whilst every care has been taken in the production of the above review, no liability can be accepted for any loss or damage incurred in any way whatsoever by any person who may seek to rely on the information and views contained in this material. This report is being produced for the internal use of the intended recipients only and no reproducing is allowed, without the prior written authorization of Intermodal Shipbrokers Co.
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Wednesday, 22 March 23
MARKET INSIGHT - INTERMODAL
The crude tanker market continues to gather momentum as we head towards the end of 1Q2023, against a backdrop of strong U.S. exports paired with a ...
Wednesday, 22 March 23
WILL LOWER GAS PRICES SPARK SWITCHING IN EUROPE AND ASIA?
Record high prices devastated demand for gas and LNG across Asia and Europe last year. But with prices falling, companies are starting to re-evalua ...
Monday, 20 March 23
NTPC MULLS 5.4 MILLION TONNES COAL IMPORT IN FIRST HALF OF 2023-24: PTI
State-run power giant NTPC is planning to import around 5.4 million tonnes of coal to meet the supply shortage during the first half 2023-24 fiscal ...
Monday, 20 March 23
S. AFRICA’S EXXARO RESOURCES SAYS COAL PRICES COOLING OFF - REUTERS
South Africa’s Exxaro Resources on Thursday posted a 28% jump in 2022 profit after seeing average coal prices surge more than 150%, but warne ...
Saturday, 18 March 23
RUSSIAN LNG EXPORTS TO EUROPE REMAIN HIGH - VESSELS VALUE
Russian LNG exports to Europe remained at very high levels in February at 3.6 million CBM, following a 13 month high in January of 4.1 million CBM. ...
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- Semirara Mining Corp, Philippines
- Orica Australia Pty. Ltd.
- Meenaskhi Energy Private Limited - India
- CNBM International Corporation - China
- Thiess Contractors Indonesia
- The University of Queensland
- Kartika Selabumi Mining - Indonesia
- Vizag Seaport Private Limited - India
- Aboitiz Power Corporation - Philippines
- Tata Chemicals Ltd - India
- Bhoruka Overseas - Indonesia
- Gujarat Sidhee Cement - India
- Asmin Koalindo Tuhup - Indonesia
- Bukit Makmur.PT - Indonesia
- Sindya Power Generating Company Private Ltd
- IEA Clean Coal Centre - UK
- Global Business Power Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Straits Asia Resources Limited - Singapore
- MS Steel International - UAE
- Aditya Birla Group - India
- Australian Commodity Traders Exchange
- Banpu Public Company Limited - Thailand
- Planning Commission, India
- Bangladesh Power Developement Board
- PetroVietnam Power Coal Import and Supply Company
- GVK Power & Infra Limited - India
- Ministry of Transport, Egypt
- Central Java Power - Indonesia
- Maheswari Brothers Coal Limited - India
- Lanco Infratech Ltd - India
- Wood Mackenzie - Singapore
- Edison Trading Spa - Italy
- The Treasury - Australian Government
- Coastal Gujarat Power Limited - India
- The State Trading Corporation of India Ltd
- Pendopo Energi Batubara - Indonesia
- Goldman Sachs - Singapore
- Kaltim Prima Coal - Indonesia
- GAC Shipping (India) Pvt Ltd
- SN Aboitiz Power Inc, Philippines
- Parliament of New Zealand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Mercuria Energy - Indonesia
- Africa Commodities Group - South Africa
- Indo Tambangraya Megah - Indonesia
- Georgia Ports Authority, United States
- Barasentosa Lestari - Indonesia
- Oldendorff Carriers - Singapore
- Thai Mozambique Logistica
- Petron Corporation, Philippines
- Tamil Nadu electricity Board
- India Bulls Power Limited - India
- Salva Resources Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Bhatia International Limited - India
- Miang Besar Coal Terminal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- PTC India Limited - India
- Ind-Barath Power Infra Limited - India
- Ceylon Electricity Board - Sri Lanka
- Sree Jayajothi Cements Limited - India
- Grasim Industreis Ltd - India
- London Commodity Brokers - England
- TNB Fuel Sdn Bhd - Malaysia
- Ministry of Finance - Indonesia
- OPG Power Generation Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Mercator Lines Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Romanian Commodities Exchange
- Port Waratah Coal Services - Australia
- Ambuja Cements Ltd - India
- IHS Mccloskey Coal Group - USA
- Coal and Oil Company - UAE
- Dalmia Cement Bharat India
- Sical Logistics Limited - India
- Bukit Baiduri Energy - Indonesia
- CIMB Investment Bank - Malaysia
- Bulk Trading Sa - Switzerland
- Bhushan Steel Limited - India
- Bharathi Cement Corporation - India
- Wilmar Investment Holdings
- Standard Chartered Bank - UAE
- SMG Consultants - Indonesia
- Intertek Mineral Services - Indonesia
- Essar Steel Hazira Ltd - India
- Xindia Steels Limited - India
- Borneo Indobara - Indonesia
- Attock Cement Pakistan Limited
- Global Coal Blending Company Limited - Australia
- Indian Energy Exchange, India
- Siam City Cement - Thailand
- Kapuas Tunggal Persada - Indonesia
- Star Paper Mills Limited - India
- Malabar Cements Ltd - India
- Posco Energy - South Korea
- Anglo American - United Kingdom
- Gujarat Electricity Regulatory Commission - India
- Bukit Asam (Persero) Tbk - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Medco Energi Mining Internasional
- VISA Power Limited - India
- Minerals Council of Australia
- Indonesian Coal Mining Association
- Energy Link Ltd, New Zealand
- Simpson Spence & Young - Indonesia
- Antam Resourcindo - Indonesia
- Kepco SPC Power Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Riau Bara Harum - Indonesia
- Sojitz Corporation - Japan
- Eastern Coal Council - USA
- Jindal Steel & Power Ltd - India
- TeaM Sual Corporation - Philippines
- Sinarmas Energy and Mining - Indonesia
- Mjunction Services Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Larsen & Toubro Limited - India
- White Energy Company Limited
- Deloitte Consulting - India
- Global Green Power PLC Corporation, Philippines
- Rio Tinto Coal - Australia
- McConnell Dowell - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Semirara Mining and Power Corporation, Philippines
- Independent Power Producers Association of India
- Heidelberg Cement - Germany
- South Luzon Thermal Energy Corporation
- Commonwealth Bank - Australia
- Kohat Cement Company Ltd. - Pakistan
- Singapore Mercantile Exchange
- Altura Mining Limited, Indonesia
- Samtan Co., Ltd - South Korea
- Indika Energy - Indonesia
- Price Waterhouse Coopers - Russia
- Madhucon Powers Ltd - India
- Indogreen Group - Indonesia
- Orica Mining Services - Indonesia
- Timah Investasi Mineral - Indoneisa
- Globalindo Alam Lestari - Indonesia
- Renaissance Capital - South Africa
- New Zealand Coal & Carbon
- PNOC Exploration Corporation - Philippines
- Therma Luzon, Inc, Philippines
- Kumho Petrochemical, South Korea
- SMC Global Power, Philippines
- Cement Manufacturers Association - India
- Sarangani Energy Corporation, Philippines
- Interocean Group of Companies - India
- Metalloyd Limited - United Kingdom
- Energy Development Corp, Philippines
- Sakthi Sugars Limited - India
- San Jose City I Power Corp, Philippines
- Central Electricity Authority - India
- Leighton Contractors Pty Ltd - Australia
- Kalimantan Lumbung Energi - Indonesia
- Coalindo Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Marubeni Corporation - India
- Agrawal Coal Company - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- International Coal Ventures Pvt Ltd - India
- Videocon Industries ltd - India
- Power Finance Corporation Ltd., India
- Pipit Mutiara Jaya. PT, Indonesia
- PowerSource Philippines DevCo
- European Bulk Services B.V. - Netherlands
- Economic Council, Georgia
- Uttam Galva Steels Limited - India
- Baramulti Group, Indonesia
- ICICI Bank Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Bayan Resources Tbk. - Indonesia
- Karaikal Port Pvt Ltd - India
- Australian Coal Association
- Vedanta Resources Plc - India
- Directorate Of Revenue Intelligence - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Chamber of Mines of South Africa
- Carbofer General Trading SA - India
- Meralco Power Generation, Philippines
- Savvy Resources Ltd - HongKong
- Latin American Coal - Colombia
- Kideco Jaya Agung - Indonesia
- Siam City Cement PLC, Thailand
- Karbindo Abesyapradhi - Indoneisa
- Formosa Plastics Group - Taiwan
- Toyota Tsusho Corporation, Japan
- Manunggal Multi Energi - Indonesia
- Ministry of Mines - Canada
- Jaiprakash Power Ventures ltd
- Iligan Light & Power Inc, Philippines
- Electricity Generating Authority of Thailand
- Eastern Energy - Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Makarim & Taira - Indonesia
- ASAPP Information Group - India
- GMR Energy Limited - India
- Electricity Authority, New Zealand
- Merrill Lynch Commodities Europe
- Binh Thuan Hamico - Vietnam
- Billiton Holdings Pty Ltd - Australia
- Gujarat Mineral Development Corp Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Parry Sugars Refinery, India
- Mintek Dendrill Indonesia
- Indian Oil Corporation Limited
- Trasteel International SA, Italy
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